Facebook Sticking It to Brands – Great News for FB Stock

by Tom Taulli | March 21, 2014 12:30 pm

During the past year, Facebook’s (FB[1]) Mark Zuckerberg has gone to zombie-esque language. But rather than moaning “Brainsssss,” the Facebook CEO can only be heard repeating “monetizaaaaaaation, mooooooobile.”

Quite the change. And it’s something that’s about to affect Facebook’s ad world in a big way.

How Will FB Make Bank Next?

When FB stock hit the markets in 2012, Mark Zuckerberg had a pretty lackadaisical view of monetization, and even mobile to a lesser extent. He truly seemed to care about the product and nothing else, to the detriment of his newly public status.

However, a plunge in FB stock was followed by a change in attitude, and like all things, Mark Zuckerberg met with success. Facebook stock is up a sizzling 160% in the past year, growing the company to more than $170 billion.

There’s been plenty of speculation about where Zuckerberg’s monetization focus will hit next, with many laying odds on Instagram. But according to sources familiar with the company, it looks like Facebook is putting its crosshairs on once-free services, according to Valleywag[2]:

“A source professionally familiar with Facebook’s marketing strategy, who requested to remain anonymous, tells Valleywag that the social network is ‘in the process of’ slashing ‘organic page reach’ down to 1 or 2 percent. This would affect ‘all brands’—meaning an advertising giant like Nike[3], which has spent a great deal of internet effort collecting over 16 million Facebook likes, would only be able to affect of around a 160,000 of them when it pushes out a post.”

The potential boost this could give FB stock is considerable. In theory, brands will have their prospective audience slashed into mere slivers — and the only way to really recoup that is by paying up.

And it’s a little salt in the wound of businesses that have spent years building a Facebook presence, as those efforts now could amount to very little. (But, this is always a risk when working with an online platform.)

The upside for consumers is that it shouldn’t harm the user experience. In fact, the fee could actually reduce the number of commercial posts you see — at least if you follow a lot of brands.

For the companies with money to spend, their agencies and experts will develop ads that can get results — not just spam. And yes, plenty of companies will stick around. You don’t just walk away from the ability to leverage a database of 1.2 billion users with relevant ads.

But FB stock holders really walk away winners in all this. According to eMarketer[4], the mobile ad market is expected to soar 75% in 2014 to $31.5 billion, and Facebook was already lined up to get a sizable chunk of that.